ERISA PRE-EMPTION REQUIRES A CLEAR ASSIGNMENT AND BALANCE BILLING ISN’T QUITE DEAD

Early last week, the United Stated District Court of the Southern District of Texas held that (1) the Employee Retirement Income Security Act (ERISA) did not pre-empt and (2) the Texas Legislature explicitly left some (as-yet-to-be-determined) circumstances in which balance billing is permitted.

In ERLC, LLC v. Blue Cross Blue Shield of Texas et. al., Guzman was taken to ERLC for emergency medical treatment.  His insurer, BCBS considered ERLC an out-of-network provider, and only paid ERLC $466 of its $90,000 bill.  Guzman paid $412.  ERLC sued BCBS and Guzman in state court for breach of contract and insurance code violations.  BCBS sought removal, claiming jurisdiction under (1) federal question, stating ERISA pre-empted all of the suit’s claims, and (2) diversity, claiming Guzman was improperly joined.  The Court ultimately denied both and remanded to state court.

The Court held there was no federal question jurisdiction in this case for two reasons: (1) there was no evidence in the record that Guzman assigned his ERISA claims to ERLC, thus ERLC lacked standing to bring any ERISA claims, and (2) even if there had been an assignment, the Texas Insurance Code  included a claim for a rate of repayment, distinct from ERISA’s provision for a right of repayment.  ERLC lacking standing to bring an ERISA claim and having distinct state court claims, the Court found no federal question jurisdiction.

To determine whether the Court had diversity jurisdiction, it considered whether Guzman was improperly joined as a defendant.  This was determined by whether ERLC could plead a valid Insurance Code violation against Guzman individually.  The Court held that ERLC could in fact bring such a claim in the form of a right to “balance” bill Guzman.  BCBS noted, and the Court agreed, that the Texas Legislature seemingly “substantially limited the right of non-network providers to bill patients for the difference between the billed amount and the paid amount” (citing Tex. Med. Res., LLP v. Molina Healthcare of Tex. Inc.., 620 S.W.3d 458, 467 (Tex. App.—Dallas 2021, pet. granted)).  However, the court noted that certain exceptions are carved out for out-of-network providers in the Texas Administrative Code, which may allow some instances in which such providers may bill patients for the provided services.  Thus, the Court gave the benefit of the doubt to ERLC, the non-movant for removal. 

Editor’s Note: As the law continues to evolve in the area of balance billing, state courts and/or the Texas Legislature will almost undoubtedly continue to shape this area of the law into a more conclusive resolution.